Woodward Governor Company (NASDAQ: WGOV) today reported financial
results for its first quarter of fiscal year 2009. (All per share
amounts are presented on a fully diluted basis.)
Quarterly Highlights
-- Total sales for the quarter of $344.7 million, up 27 percent over the
first quarter of last year. Organic sales up 7 percent.
-- Earnings per share for the quarter of $0.39 compared with last year's
$0.36.
-- Operating earnings, excluding Airframe Systems, increased to $42.2
million, up 9 percent from $38.9 million last year.
-- Cash generated by operations during the quarter was $5.5 million, down
from $6.4 million generated in the first quarter of last year.
Net sales for the quarter were $344.7 million, up 27 percent
from $272.1 million for the first quarter of last year. Net
earnings for the quarter were $27.1 million, or $0.39 per share,
compared with $25.3 million, or $0.36 per share, in last year's
first quarter. Exchange rates had a negative impact of
approximately 3 percent on sales and approximately $0.03 per
diluted share on net earnings for the quarter.
"Growth continued in our businesses and markets through our
fiscal first quarter, although at a more moderate pace than in
recent quarters. We remain focused on cost control and capitalizing
on opportunities that may present themselves in times of
uncertainty," said Chairman and Chief Executive Officer Thomas A.
Gendron.
Quarterly Segment Results
Turbine Systems
Turbine Systems' segment net sales for the first quarter were
$144.7 million, an increase of 11 percent from $130.8 million for
the first quarter a year ago. Segment earnings for the first
quarter increased 7 percent to $29.1 million from $27.2 million for
the same quarter a year ago. Segment earnings as a percent of sales
were 20.1 percent this quarter compared to 20.8 percent in the same
quarter for the prior year. Our sales performance reflected strong
demand for our industrial offerings and moderate growth in demand
for our aerospace products.
Engine Systems
Engine Systems' segment net sales for the first quarter were
$114.2 million compared to $114.0 million for last year's first
quarter. Segment earnings for the quarter decreased 3 percent to
$11.7 million from $12.1 million for the same period a year ago.
Segment earnings as a percent of sales were 10.2 percent this
quarter compared to 10.6 percent in the same quarter last year.
Exchange rates negatively affected both net sales and segment
earnings by approximately $3 million and $2 million, respectively.
This earnings impact is partially offset by initiatives to improve
profitability. During the quarter Woodward acquired MotoTron, which
was integrated into the Engine Systems segment. The inclusion of
MotoTron's operating results for the quarter did not have a
significant impact on Engine Systems' overall results.
Electrical Power Systems
Electrical Power Systems' segment net sales for the first
quarter were $61.8 million, an increase of 8 percent from $57.5
million for the first quarter a year ago. In this segment, without
the negative effects of exchange rates, sales growth was
approximately 17 percent. Segment earnings for the quarter
increased 27 percent to $9.2 million from $7.2 million for the same
quarter a year ago. Wind inverter sales were up 67 percent,
partially offset by declines in sales of other products produced by
the segment. Segment earnings as a percent of sales increased to
14.8 percent this quarter compared to 12.5 percent for the same
quarter last year. Earnings were favorably affected by sales volume
and related leverage and improved manufacturing efficiency,
partially offset by $1 million of unfavorable currency
translation.
Airframe Systems
During this quarter we acquired MPC, which is now our Airframe
Systems segment. Segment net sales were $52.3 million and segment
earnings were $1.8 million. Airframe's major markets of commercial
and military aerospace, both OEM and aftermarket, were stable
relative to MPC's prior year. Segment earnings reflect $3.2 million
of intangible amortization (a non-cash charge) related to the
recent acquisition. Anticipated synergies and cost savings have
only begun to be realized in the first quarter results. We believe
that operational integration is on track and we anticipate
delivering significantly improved financial results as we go
through the year. We still expect the acquisition to be neutral to
slightly accretive in 2009 if sales are not too negatively impacted
by the downturn.
Nonsegment
Nonsegment expenses for the quarter were $7.8 million, up
slightly from $7.6 million last year, decreasing to 2.3 percent of
net sales for the quarter, from 2.8 percent of sales last year.
Our effective tax rate this quarter was lower than last year
primarily as a result of the retroactive reinstatement of the U.S.
research credit.
Cash Flow and Financial Position
Net cash generated from operating activities was $5.5 million
for the three-month period compared with $6.4 million for the first
three months of fiscal year 2008. Capital expenditures for the
quarter were $8.8 million compared with $6.6 million last year. As
previously announced, during October 2008, Woodward acquired MPC
Products Corporation and MotoTron Corporation for approximately
$370 million and $17 million, respectively, and issued a total of
$400 million of long-term debt to finance the acquisitions and
repay associated obligations. As a result, our ratio of debt to
debt-plus-equity increased to 40.1 percent at December 31, 2008
compared to 7.2 percent at September 30, 2008.
Outlook
The economy remains a concern as we move through the year.
Although credit markets are still tight, some liquidity may be
returning as governments implement their recovery programs. The
strength in the dollar relative to last year continues to exert
some downward pressure on our earnings, although this may be
somewhat offset by reductions in some commodity pricing. Overall
visibility to future market conditions has not significantly
improved since last quarter and considerable uncertainty
remains.
We continue to take actions to broaden our geographic base,
expand market share, and increase the efficiency of our
infrastructure. While we believe the economy continues to have
downside potential, our guidance has not changed. We anticipate
full-year organic sales to be flat to slightly up, with overall
sales, including our recent acquisitions, to be approximately $1.4
to $1.5 billion and related earnings per share of $1.65 to
$1.90.
Conference Call
Woodward will hold an investor conference call at 6:00 p.m. EST
on Tuesday, January 20, 2009 to provide an overview of the
financial performance for the first quarter of fiscal 2009,
business highlights, and outlook for the remainder of the year. You
are invited to listen to the live webcast of our conference call,
or a recording, and view or download accompanying presentation
slides at our website, www.woodward.com.
You may also listen to the call by dialing 1-866-206-6900
(domestic) or 1-703-639-1110 (international). Participants should
call prior to the start time to allow for registration; the
Conference ID is 1319207. An audio replay will be available by
telephone from 10:00 p.m. EST January 20, 2009 until 11:59 p.m. EST
on January 23, 2009. The telephone number to access the replay is
1-888-266-2081 (domestic) or 1-703-925-2533 (international);
reference access code 1319207.
About Woodward
Woodward is an independent designer, manufacturer, and service
provider of energy control and optimization solutions for
commercial and military aircraft, turbines, reciprocating engines,
and electrical power system equipment. The company's innovative
fluid energy, combustion control, electrical energy, and motion
control systems help customers offer cleaner, more reliable, and
more cost-effective equipment. Leading original equipment
manufacturers use our products and services in aerospace, power and
process industries, and transportation. Woodward is headquartered
in Fort Collins, Colo., USA and serves global markets in aerospace,
power and process industries, and transportation. Visit our website
at www.woodward.com.
Information in this press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve risks and uncertainties, including,
but not limited to, statements regarding future sales, earnings,
liquidity, relative profitability and the impact of economic
conditions and downturns on Woodward. Readers are cautioned that
these forward-looking statements are only predictions and are
subject to risks, uncertainties, and assumptions that are difficult
to predict. Factors that could cause actual results and the timing
of certain events to differ materially from the forward-looking
statements include, but are not limited to, the recent instability
of the credit markets and other adverse economic and industry
conditions; the outcome of the investigation by the U.S. Department
of Justice regarding certain pricing practices of MPC Products
Corporation prior to 2006; Woodward's ability to reduce its
expenses in proportion to any sales shortfalls; the ability of
Woodward's suppliers to meet their obligations; Woodward's ability
to integrate acquisitions and costs related thereto; Woodward's
ability to minimize excess inventory as a result of cancelled
orders; Woodward's ability to operate its business and pursue
business strategies in the light of certain restrictive covenants
in its outstanding debt documents; unforeseen events that
significantly reduce commercial airline travel; risks from
operating internationally, including the impact on reported
earnings from fluctuations in foreign currency exchange rates, and
other risk factors described in Woodward's Annual Report on Form
10-K for the year ended September 30, 2008, and Quarterly Report on
Form 10-Q for the quarter ended December 31, 2008, to be filed
shortly.
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended
December 31,
----------------------
(Unaudited - in thousands except per share amounts) 2008 2007
---------- ----------
Net sales $ 344,744 $ 272,063
---------- ----------
Costs and expenses:
Cost of goods sold 244,286 190,830
Selling, general, and administrative expenses 32,460 25,980
Research and development costs 19,084 15,626
Amortization of intangible assets 4,828 1,895
Interest expense 6,537 956
Interest income (662) (580)
Other, net 92 (1,132)
---------- ----------
Total costs and expenses 306,625 233,575
---------- ----------
Earnings before income taxes 38,119 38,488
Income taxes (11,055) (13,163)
---------- ----------
Net earnings $ 27,064 $ 25,325
========== ==========
Earnings per share amounts:
Basic $ 0.40 $ 0.37
Diluted $ 0.39 $ 0.36
========== ==========
Weighted-average number of shares outstanding:
Basic 67,726 67,884
Diluted 69,166 70,038
========== ==========
Cash dividends per share $ 0.060 $ 0.055
========== ==========
Notes: A two-for-one stock split was approved by stockholders at the 2007
annual meeting of stockholders on January 23, 2008. The stock split
became effective for stockholders at the close of business on
February 1, 2008. The number of shares reported in these condensed
consolidated financial statements has been updated from amounts
reported prior to February 1, 2008, to reflect the effects of the
split.
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
(Unaudited - in thousands) 2008 2008
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 97,520 $ 109,833
Accounts receivable 195,227 178,128
Inventories 296,422 208,317
Deferred income tax assets 46,818 25,128
Other current assets 21,710 16,649
------------- -------------
Total current assets 657,697 538,055
Property, plant, and equipment-net 189,604 168,651
Goodwill 325,726 139,577
Other intangibles-net 232,748 66,106
Deferred income tax assets 5,126 6,208
Other assets 13,535 8,420
------------- -------------
Total assets $ 1,424,436 $ 927,017
============= =============
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings $ -- $ 4,031
Current portion of long-term debt 19,047 11,560
Accounts payable 64,017 65,427
Income taxes payable 1,076 2,235
Accrued liabilities 110,097 85,591
------------- -------------
Total current liabilities 194,237 168,844
Long-term debt, less current portion 415,090 33,337
Deferred income tax liabilities 96,576 27,513
Other liabilities 70,166 67,695
------------- -------------
Total liabilities 776,069 297,389
Stockholders' equity 648,367 629,628
------------- -------------
Total liabilities and stockholders' equity $ 1,424,436 $ 927,017
============= =============
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended
December 31,
(Unaudited - in thousands) 2008 2007
--------- ---------
Net cash provided by operating activities $ 5,470 $ 6,373
--------- ---------
Cash flows from investing activities:
Business acquisitions, net of cash acquired (369,043) --
Payments for purchase of property, plant, and
equipment (8,505) (6,572)
Proceeds from disposal of assets 184 267
--------- ---------
Net cash used in investing activities (377,364) (6,305)
--------- ---------
Cash flows from financing activities:
Cash dividends paid (4,068) (3,726)
Proceeds from sales of treasury stock as a result of
exercises of stock options 760 4,160
Purchases of treasury stock -- (4,777)
Excess tax benefits from stock compensation 207 5,258
Proceeds from issuance of long-term debt 400,000 --
Net payments under revolving lines of credit and
short-term borrowings (4,031) (31)
Payments of long-term debt (10,714) (11,884)
Payment of long-term debt assumed in MPC acquisition (18,494) --
Debt issuance costs (3,063) --
--------- ---------
Net cash provided by (used in) financing activities 360,597 (11,000)
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents (1,016) 439
--------- ---------
Net change in cash and cash equivalents (12,313) (10,493)
Cash and cash equivalents, beginning of period 109,833 71,635
--------- ---------
Cash and cash equivalents, end of period $ 97,520 $ 61,142
========= =========
Woodward Governor Company and Subsidiaries
SELECTED FINANCIAL INFORMATION
Three Months Ended
December 31,
--------------------
(Unaudited - in thousands) 2008 2007
--------- ---------
Segment net sales *:
Turbine Systems $ 144,710 $ 130,793
Engine Systems 114,223 114,034
Electrical Power Systems 61,842 57,474
Airframe Systems 52,318 --
Less intersegment sales (28,349) (30,238)
--------- ---------
Total external sales $ 344,744 $ 272,063
========= =========
Segment earnings**:
Turbine Systems $ 29,135 $ 27,228
As a percent of segment sales 20.1 20.8
Engine Systems 11,695 12,061
As a percent of segment sales 10.2 10.6
Electrical Power Systems 9,166 7,194
As a percent of segment sales 14.8 12.5
Airframe Systems 1,801 --
As a percent of segment sales 3.4 n/a
--------- ---------
Total segment earnings 51,797 46,483
Nonsegment expenses (7,803) (7,619)
--------- ---------
Operating earnings 43,994 38,864
Interest expense and income, net (5,875) (376)
--------- ---------
Consolidated earnings before income taxes $ 38,119 $ 38,488
========= =========
Capital expenditures $ 8,776 $ 6,572
Depreciation expense 9,177 7,402
========= =========
*This schedule reconciles segment sales, which include intersegment sales,
with consolidated external sales.
**This schedule reconciles segment earnings, which excludes certain costs,
to consolidated earnings before taxes.
Woodward Governor Company and Subsidiaries
RECONCILIATION OF NET EARNINGS TO OPERATING EARNINGS AND EBITDA
Three Months Ended
December 31,
----------------------
(Unaudited - in thousands) 2008 2007
---------- ----------
Net earnings $ 27,064 $ 25,325
Income taxes 11,055 13,163
Interest expense 6,537 956
Interest income (662) (580)
---------- ----------
OPERATING EARNINGS 43,994 38,864
Amortization of intangible assets 4,828 1,895
Depreciation expense 9,177 7,402
---------- ----------
EBITDA $ 57,999 $ 48,161
========== ==========
EBITDA (earnings before interest, taxes, depreciation, and amortization) is
a non-GAAP financial measure. The use of this measure is not intended to be
considered in isolation of or as a substitute for the financial information
prepared and presented in accordance with accounting principles generally
accepted in the United States of America. Securities analysts, investors,
and others frequently use EBITDA in their evaluation of companies,
particularly those with significant property, plant, and equipment, and
intangible assets that are subject to amortization. Management uses EBITDA
in reviewing compliance with its debt covenants and in evaluating capital
structure impacts of various strategic scenarios.
CONTACT: Robert F. Weber, Jr. Chief Financial Officer and
Treasurer 970-498-3112 Woodward Governor Company 1000 East Drake
Road Fort Collins, Colorado 80525, USA Tel: 970-482-5811 Fax:
970-498-3058
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